As interest rates remain at 0.5%, looks at where to put savings

11 May 2009 / by Rebecca Sargent
Interest rates remain at 0.5 per cent, but where can you get a decent return on your money? Chartered financial planner at, Sharon Bratley takes a look.

Under the mattress

In December last year, research* found that 20 per cent of survey respondents believed that the best place for their money was in cash under the mattress at home.

Commenting, Mrs Bratley said: "The large number of savers who thought that keeping money in cash at home was the safest option was a reflection of the mood after a number of banks, including Lloyds, HBOS and Icesave, revealed the difficulty they were in.

"Ultimately, keeping money this way offers little security or return, as there is a chance that home insurance will not cover large sums of cash kept in the home. Provided the amount saved in each FSA authorised institution is less than £50,000, savers would be wiser to put the money into a savings account that is protected by the Financial Services Compensation Scheme (FSCS)."

Savings Accounts

"The type of savings account you choose will depend on your personal circumstances," says Mrs Bratley.

"Some people may need immediate access to their cash, particularly during turbulent economic climates when job losses are common. But on the other hand, some may have large sums they can keep locked away."

"Either way, people should compare the whole savings account market before making a decision that suits them," Mrs Bratley added.

"There are fixed rate bonds out there like the ICICI HiSave bond offering rates of up to 4.4 per cent for a five year fix, but there are instant access accounts like ING Direct's instant access account, offering a top rate of 2.75 per cent.

"Ultimately it depends on the person's circumstances, which type of savings account they choose, but as long as the amount with each institution holding separate FSA authorisation is less than £50,000, and the bank or financial institution is part of the FSCS, their money will be safe."


Investment products have traditionally offered higher returns than savings accounts, because of the greater risks involved, so could be an option for those willing to take more risk.

Commenting, Mrs Bratley said: "There are a range of investment products to choose from, and again, like savings accounts, the right product will depend on the person's needs.

"For those who want some or all of their capital guaranteed, we offer a range of structured investment products, which could provide the security of capital protection, coupled with the potential higher returns associated with the stock market.

"Nevertheless, as with all investment products, it is important to remember that there will be some element of risk involved, depending on the product chosen," Mrs Bratley added.


ISAs offer a tax efficient method of saving and investing. Until recently the limit was up to £7,200, with up to £3,600 in cash and the balance in stocks and shares. However, following last month's Budget, over 50s can invest up to £5,200 into a cash ISA bringing the total investment allowed in a stocks and shares ISA to £10,200 from October 6 2008. (This new increased limit will be available to all from April 6 2010).

Commenting, Mrs Bratley said: "For those who can afford to save and invest, ISAs are a great way to make the most of your tax free savings allowance. Investors wanting to make the most of this should keep an eye out for structured products that allow ISA investment.

"Meanwhile, cash ISAs are still offering interest rates of more than three per cent, so could be a viable option for savers."


*Research conducted by OnePoll for with 2,000 respondents